Benchmarking EU & U.S.

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Benchmarking EU & U.S.

  1. 1. It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change. — Charles Darwin www.itif.org The Information Technology and Innovation Foundation 1250 I Street, NW | Suite 200 | Washington, D.C. 20005 mail@itif.org | (202) 449-1351
  2. 2. The ATlAnTic cenTury Benchmarking eu & u.S. innovation and competitiveness February 2009
  3. 3. About The information Technology and innovation Foundation The Information Technology and Innovation Foundation (ITIF) is a nonprofit, nonpartisan public policy think tank committed to articulating and advancing a productivity and pro-innovation public policy agenda internationally, in Washington and the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Our mission is to help policymakers better understand the nature of the new innovation economy and the types of public policies needed to drive innovation, productivity and broad-based prosperity. ITIF publishes policy reports, holds forums and policy debates, advises elected officials and their staff, and is an active resource for the media. It develops new and creative policy proposals to advance innovation and analyzes existing policy issues through the lens of advancing innovation and productivity. For further information, to view this report online, or to view other ITIF publications, please find us at the address below: www.itif.org • mail@itif.org 1250 I Street, NW • Suite 200 • Washington, D.C. 20005 Phone: (202) 449-1351• Fax: (202) 638-4922 About The european-American Business council The European American Business Council (EABC) was legally chartered in 1989 as the European Community Chamber of Commerce (ECCC) in the United States. On June 2, 1990, the EABC went public in New York and Washington. In 1997, the EABC was renamed the European-American Business Council to reflect the organization’s expanding policy advocacy before both European and American governments. At each stage of growth, the EABC has remained an independent business association, funded wholly by its member companies. Today the EABC is recognized by the European Commission as the official European Business Organization in America. ITIF appreciates the financial assistance received from the European-American Business Council for this project. The contents and views of this publication are solely the responsibility of the Information Technology and Innovation Foundation. Page ii The Atlantic Century
  4. 4. The ATlAnTic cenTury Benchmarking eu & u.S. innovation and competitiveness robert D. Atkinson and Scott M. Andes The information Technology and innovation Foundation February 2009 The information Techology and innovation Foundation Information Technology and Innovation Foundation Page 3 iii
  5. 5. About the Authors Dr. Robert D. Atkinson is President of the Information Technology and Innovation Foundation. As former director of the Progressive Policy Institute’s Technology and New Economy Project, executive director of the Rhode Island Economic Policy Council, and project director of the Congressional Office of Technology Assessment, he has conducted groundbreaking technology policy research, advised policymakers, and written and spoken extensively on technology issues. He is the author of The Past and Future of America’s Economy: Long Waves of Innovation that Power Cycles of Growth (Edward Elgar: 2005). Scott M. Andes is a research assistant at the Information Technology and Innovation Foundation and a graduate of the London School of Economics. Acknowledgements We would like to thank Ameya Ananth, Priscilla Jang and Kerry Kemp for their editorial support. We want to express our gratitude and appreciation to those who provided valuable input, including Dan Hamilton, Kent Hughes, Joesph Quinlin and Simon Serfaty. Page iv The Atlantic Century
  6. 6. contents EXECUTIVE SUMMARY....................................................................................................................1 INTRODUCTION Methodology........................................................................................................................................3 Europe vs. the United States..............................................................................................................3 Europe and the United States vs. the Rest of the World....................................................................4 Overall Scores for Each Country and Region.....................................................................................5 Change Scores for Each Country and Region....................................................................................7 Box 1...................................................................................................................................................9 INDICATORS HUMAN CAPITAL Higher Education Attainment.............................................................................................................10 Science and Technology Researchers...............................................................................................11 INNOVATION CAPACITY Corporate Investment in R&D............................................................................................................12 Government Investment in R&D........................................................................................................13 Share and Quality of World’s Scientific and Technical Publications...................................................14 ENTREPRENUERSHIP Venture Capital...................................................................................................................................15 New Firms..........................................................................................................................................16 INFORMATION TECHNOLOGY INFRASTRUCTURE E-Government....................................................................................................................................17 Broadband Telecommunications........................................................................................................18 Corporate Investment in Information Technology...............................................................................19 ECONOMIC POLICY FACTORS Effective Corporate Tax Rates............................................................................................................20 Ease of Doing Business.....................................................................................................................21 ECONOMIC PERFORMANCE Trade Balance....................................................................................................................................22 Foreign Direct Investment Inflows......................................................................................................23 GDP per Working-Age Adult..............................................................................................................24 Productivity...........................................................................................................................................25 DISCUSSION AND POlICY IMPlICATIONS…..............................…………………….............…...26 APPENDIX: WEIghTINg METhODOlOgY……………...........................................................…..28 DATA SOURCES………………………………………..…………...................………………………….29 ENDNOTES………………………………………………………………………...............................…..31 The Information Technology and Innovation Foundation Page v
  7. 7. EXECUTIVE SUMMARY i needs to put in place a robust economic development policy. Likewise, t has become almost a cliché to point out that the rise of advanced the European Commission needs to expand its efforts to spur economic transportation and communication technologies have provided firms development, particularly by increasing its support for science and innovation much more locational freedom and that the market for an increased and ensuring that its regulatory framework supports innovation. share of goods and services is now international. But these and other factors have dramatically increased the pressures on nations to be globally Although it is beyond the scope of this report to lay out a detailed competitive—and the global economic recession will only heighten such competitiveness and innovation agenda, the broad outline of such an pressures. Moreover, many nations no longer compete principally on low agenda is as follows. Nations or regions should: costs, but instead compete on the basis of innovation and knowledge as they seek to create, grow and attract high value-added firms. This report assesses nations’ innovation-based, global competitiveness. 1. Put in place incentives for firms to innovate within their borders. These should include robust R&D tax incentives; incentives, such as accelerated depreciation, to invest in new Unlike other reports that evaluate a country’s economic structure or policy equipment, particularly IT; and other policies that spur investment factors or economic performance alone, this study is based on a recognition in the building blocks of growth, such as workforce development that all these factors must be considered together to create a holistic tax credits. understanding of how a country is performing in terms of global innovation and competitiveness and whether or not that performance is expected 2. Be open to high-skill immigration. High skill immigrants are to continue, decline, or increase in the future. The 16 indicators used in the source of many new ideas and innovations. Countries that are this study to assess global competitiveness fall into six broad categories: open to high skill immigration will be able to better succeed. (1) human capital; (2) innovation capacity; (3) entrepreneurship; (4) IT infrastructure; (5) economic policy; and (6) economic performance. 3. Foster a digital economy. Nations should not only expand public investments in IT in areas such as health care, energy Unlike several recent studies that find that the United States is the global systems, transportation, government, and education, but also leader in innovation and competitiveness, (see Box 1) ITIF finds that the put in place the right regulatory frameworks to spur, not limit, United States ranks sixth overall among the 40 nations/regions (with a global digital investment. Nations need to also consider how existing competitiveness score of 63.9 that is 15 percent below the leader Singapore’s regulatory and public procurement policies can be redesigned to score of 73.4). The EU-15 region ranks 18th in global competitiveness intentionally spur digital transformation. among the 40 nations/regions (with a global competitiveness score of just 52.5, 40 percent below Singapore’s score). Thus, our analysis indicates that the United States is not the runaway leader in global competitiveness that 4. Support the kinds of institutions that are critical to innovation. Nations need to expand funding not just for university some believe it to be, but still leads Europe. research, but for the kinds of mechanisms and institutions that help foster commercialization of research. In addition, they need Moreover, strikingly ITIF finds that all of the 39 other countries and regions to boost support for a host of efforts such as local economic studied have made faster progress toward the new knowledge-based development, entrepreneurship development, and workforce innovation economy in recent years than the United States. As indicated training. by the change score, the United States has made the least progress of the 40 nations/regions in improvement in international competitiveness and innovation capacity over the last decade. The EU-15 region has made some 5. Ensure that regulations and other related government policies support, not retard, innovation. Too often, powerful improvements over the last decade, but slower than the overall average interest groups (business, civic, and labor) fight against change and as a result, ranks 29th among the 40 nations/regions. But this is still and innovation, often under the guise of the public interest, but all considerably higher than the United States. If the EU-15 region as a whole too often the result is that progressive and positive innovation is continues to improve at this faster rate than the United States, it would slowed. Nations should ensure that their regulations, procurement, surpass the United States in innovation-based competitiveness by 2020. and other related policies tilt toward innovation. These findings have significant implications for Europe and the United States. First, the rise of global economic competition means that the United If operating the right way, the competitive pressures between nations can States and Europe need to think of themselves as a big state (in the case lead them all to do better, spurring them to put in place a host of policies of the United States) or a big nation (in the case of Europe), and proactively that drive productivity and innovation, which at the end of the day will benefit put in place national or continental economic development strategies. This not just individual nations and regions, but the entire global economy. But if particularly applies to the United States, where the prevailing view among competition leads nations to put in place negative-sum, beggar-thy-neighbor many Washington policymakers is that the United States has been number strategies, especially those focused on export-led growth supported by 1 for so long that it will continue to be number 1. Given this situation, the protectionist and mercantilist policies, then the global economy will be thinking goes, there is no need for the United States to develop and worse off. As such it’s up to all nations to work over the next decade to put implement a national economic development or competitiveness strategy. in place the kind of agreements and frameworks that allow international competition to drive nations to be the most innovative and fastest growing, After all the United States didn’t have a strategy before and it did just fine. but that do so in ways that spur, not retard global growth. The United States It’s time for U.S. federal policymakers to realize that the U.S. economy now and Europe, having led in the 20th century, have a special responsibility to competes with other nations, and like states after World War II did, it too lead this process in the 21st century. Page 1 The Atlantic Century
  8. 8. EXECUTIVE SUMMARY Overall Score change Score 1999-2009 § The countries/regions shown in bold are the Overall Score Change Score Rank Country Rank Country countries that are the focus of particular analysis 2009 (1999-2009) and discussion throughout the report. 1 Singapore 73.4 1 China 19.5 * North American Free Trade Agreement region, 2 Sweden 71.0 2 Singapore 19.0 which encompasses Mexico, Canada, and the 3 Luxembourg 66.2 3 Lithuania 14.8 United States. 4 Denmark 64.5 4 Estonia 18.1 ** The European Union is a supranational 5 S. Korea 64.2 5 Denmark 17.4 organization that consists of 27 countries across 6 U.S. 63.9 6 Luxembourg 16.9 the European continent. The EU-15 consists of 7 Finland 59.6 7 Slovenia `16.7 Austria, Belgium, Denmark, Finland, France, 8 UK 59.2 8 Russia 15.2 Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the 9 Japan 59.0 9 Cyprus 14.7 United Kingdom. The EU-10 consists of the 10 new 10 NAFTA* 58.6 10 Japan 14.4 member states that joined the EU in 2004: Cyprus, 11 Netherlands 58.4 11 Hungary 14.3 the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. 12 France 57.3 12 Slovakia 14.1 The EU-25 consists of all member states but the 13 Ireland 56.4 13 Czech Republic 13.8 two newest members, Bulgaria and Romania, 14 Belgium 56.3 14 India 13.6 which joined the EU in 2007 and for which there 15 Germany 55.0 15 Latvia 13.4 are not yet sufficient data for analysis. 16 Canada 54.4 16 Austria 13.2 17 Austria 52.6 17 S. Korea 13.2 18 EU-15** 52.5 18 Ireland 12.9 19 EU-10** 12.8 19 Australia 51.5 20 EU-25** 50.6 20 Spain 10.8 21 Czech Republic 47.9 21 Sweden 10.7 22 Estonia 46.1 22 France 10.6 23 Spain 43.7 23 Portugal 10.1 24 Hungary 42.5 24 Malta 9.9 25 Lithuania 40.8 25 Belgium 9.5 26 Italy 40.2 26 EU-25** 9.4 27 Portugal 38.7 27 Poland 9.4 28 Slovenia 37.6 28 UK 9.0 29 EU-15 8.5 29 Slovakia 37.0 30 EU-10** 36.9 30 Mexico 8.0 31 Latvia 36.5 31 Netherlands 7.9 32 Malta 36.2 32 Australia 7.4 33 China 36.0 33 Finland 7.3 34 Poland 35.4 34 Canada 6.3 35 Russia 35.1 35 Germany 6.3 36 Cyprus 33.2 36 Italy 5.2 37 Greece 31.5 37 NAFTA* 5.1 38 Brazil 30.1 38 Greece 5.1 39 Mexico 26.0 39 Brazil 3.7 40 U.S. 2.7 40 India 21.6 Average 36.5 Average 11.2 The Information Technology and Innovation Foundation Page 2
  9. 9. i n this report, ITIF assesses the global innovation-based competitiveness The United States leads Europe in 13 of the 16 indicators, including of 36 countries and the European Union (EU)-15 region, the EU-10 knowledge (higher education and number of researchers); innovation region, the EU-25 region, and the North Atlantic Free Trade Agreement (corporate and government R&D and scientific publications); information (NAFTA) region, both as they currently stand and in terms of progress in the technology (IT investments, e-government, and broadband); overall last decade. We focus primarily on comparisons between the United States business climate; entrepreneurship (new firms and venture capital), and and Europe and comparisons between the United States and European productivity. The EU-15 outperforms the United States in just 3 of the 16 Union and selected other nations around the world to see which is the most indicators: a lower effective corporate tax, trade performance, and foreign competitive in the new innovation economy. direct investment (FDI) inflows. These overall scores mask significant differences within Europe. Sweden Methodology ranks second of all nations examined and scores 11 percent higher than the United States, while Denmark ranks fourth. But all other EU-15 nations To create a holistic understanding of how a country is performing in terms score below the United States, with Spain scoring just 68 percent of U.S. of global competitiveness and whether or not that performance is expected levels. With Greece and Portugal scoring below several developing nations, to continue, decline, or increase in the future, ITIF used the following 16 there is considerable variation between the lowest ranking and highest indicators to evaluate the global competitiveness of the United States and ranking European nation. Within the EU-10 there is considerable variation other countries: as well, with Poland scoring at 55 percent of U.S. levels, but Estonia scoring above Spain, at 72 percent of U.S. levels. 1. Human capital: higher education attainment in the population ages 25–34; and the number of science and technology researchers per It is important to note when making comparisons between individual 1,000 employed. EU nations and the United States, that there is also significant regional 2. Innovation capacity: corporate investment in research and variation within the United States. In ITIF’s 2008 State New Economy development (R&D); government investment in R&D; and share of the Index4, for example, Massachusetts, the highest ranking state, had more world’s scientific and technical publications. than eight times the amount of corporate R&D as a share of its economy 3. Entrepreneurship: venture capital investment; and new firms. than Mississippi, the lowest ranking state. In fact top ranking states like 4. Information technology (IT) infrastructure: e-government; Massachusetts, Washington, and Maryland would likely rank significantly broadband telecommunications; and corporate investment in IT. higher than Sweden and other high-ranking EU nations if they were to be 5. Economic policy: effective marginal corporate tax rates; and the included as “nations.” ease of doing business. 6. Economic performance: trade balance; foreign direct investment Although the United States ranks higher than Europe, the trends are moving inflows; real GDP per working-age adult; and productivity. in the opposite direction. Since appoximately the beginning of this decade the EU-15 has made significantly more progress in the 16 indicators as a whole In order to calculate an overall score for each country the report calculated than the United States (although the EU-15’s change score is still below scores for each indicator and each nation on the basis of their standard average of all nations/regions examined). This is perhaps not surprising deviation from the mean for each variable.1 Each indicator was weighted given the effort made by both the European Commission and individual EU- by importance (see Appendix). Collectively the weights equaled 100. The 15 nations to become more knowledge- and innovation-based. For example, standard deviation was multiplied by the weight and the adjusted standard as part of the Lisbon Agenda, Europe has expanded government support for deviations were added together for the overall indicator. Each country’s R&D and its R&D tax incentives faster than the United States. In contrast, as total score was then divided by the best score possible. Thus, each described below, U.S. policymakers have done less, in part because many country’s final score is a percentage of the total score a nation would have believe either that the United States is not fundamentally in competition with achieved if it had finished first in every category.2 To rank change between other nations, or that it holds an insurmountable lead and will continue to the base year (the base year is generally 1999 or 2000) and current year do so. (the latest year for which data are available), ITIF calculated both absolute and percentage change for each indicator, added each for all indicators and In part because the EU-10 are starting from a lower base, but also because calculated the mean score of the two numbers and found the corresponding of some of the policy steps these nations have taken, they have made even standard deviation.3 faster progress, at a rate slightly above average and considerably higher than that of the United States. The Baltic states in particular have shown rapid europe vs. the united States rates of progress. The United States leads Europe. The overall score of the EU-15 on the 16 These indicators of regional progress, however, mask individual country indicators of global innovation and competitiveness is just 82 percent of the trends. Germany and Italy, having found it difficult to embrace the kind of U.S. score. The EU-10 scores even lower at just 57 percent of the U.S. level, reforms needed to more rapidly progress, score fifth and sixth from the last as might be expected, given EU-10 countries’ recent emergence as market in progress, respectfully (yet still ahead of the United States). In contrast, economies. many EU-15 nations, including, Denmark, Ireland, and Sweden, have made rapid progress. Page 3 The Atlantic Century
  10. 10. europe and the united States vs. the remains low costs, but if they can effectively address their weaknesses, particularly in business climate, workforce skills, and infrastructure, they are rest of the World well positioned to continue to make rapid progress and increase productivity in a wide range of sectors. To find global leaders, Asia is the place to look. Singapore tops all nations, Overall, these trends suggest that absent concerted public sector efforts by with a score 15 percent higher than the United States and 40 percent the United States and Europe to boost innovation and competitiveness, that higher than the EU-15. As John Kao documented in Innovation Nation5, this century will not be the Atlantic century, but rather the Pacific century, or Singapore has made technological innovation almost a national obsession, perhaps more accurately the Southeastern Asian century. putting in place a robust set of policies to lead the knowledge economy. Despite a lower per capita income, South Korea scores slightly ahead of While both Mexico and Brazil closed the gap with the United States over the United States, and 25 percent higher than the EU-15. It also has made the last decade, they lost ground to the EU-15 and EU-10. This reflects the technological innovation and international economic competition a national challenges that Latin American nations in general face. Stuck between the priority. For example, with favorable corporate tax policies and agencies rich and knowledge-intensive economies of Europe, Japan and the United like the South Korea Information Agency and the Industrial Technology States and the rapidly modernizing Asian nations, including low wage Foundation, South Korea has made a concerted effort to prosper through nations like India and China, Latin America, with the exception perhaps of a technology-led growth. As such it is putting in place the policies that will few nations like Chile, has not been able to develop and execute the policies help it continue its rapid growth in per capita income (albeit starting from a that would enable it to get on the high growth, knowledge-based path. low base) and ultimately likely catch up with the United States and Europe. Even Japan, which many economic pundits have mistakenly written off (in Likewise, the British Commonwealth nations—Australia, Canada, and the large part because of slow GDP growth, which stems not so much from poor United Kingdom—while progressing faster than the United States, have economic performance but from a declining working age population) scores made either less or about the same amount of progress of the EU-15. at 93 percent of U.S. levels and 14 percent ahead of the EU-15. Some might attribute these trends, and in particular the United States’ Many nations that get much of the attention as competitors in the innovation poor performance, to a process of convergence, where laggards naturally economy—including fast-developing Brazil, Russia, India, and China, catch up to leaders. To be sure on some factors there is more likely to be often called the BRICs—actually score at the bottom of the rankings. This convergence than on others. On indicators where the potential to increase does not mean that these and other low-ranking nations do not have some is limited (e.g., the percentage of the adult population with a college degree innovation strengths—they do—but as a share of their overall economies, is limited at 100 percent) convergence is more likely. But on many other these strengths are still quite minimal. The main attraction of these nations indicators where the potential is unlimited (e.g. GDP per adult) or where the remains their low costs, not their innovative infrastructures, and this situation levels are relatively low (e.g. venture capital), there is no reason to expect will likely remain for many years, at least until they raise productivity in a convergence. Therefore, while there might be convergence on some factors wide range of sectors. between high-income nations and lower-income nations, on many factors, high-income nations like the United States should be able to continue to In terms of progress, however, the picture is quite different. As noted above, make progress at least at the rate of lower income nations. Indeed growth the United States ranks last in progress. In other words, every other nation/ economists have noted that convergence between high-wage and low- region made faster progress in the last decade, and many made faster wage nations has generally not occurred.6 Moreover, if convergence really progress than the EU-15. East Asian nations, in particular, are making rapid is at work, why have highly developed nations like Austria, Denmark, Japan, strides. Perhaps not surprisingly, China comes in first in terms of progress, and Sweden made much faster progress than the United States? as they have aggressively promoted modernization and technology development. Singapore not only ranks at the top in overall score, but second Indeed, the progress of these and a number of nations is truly striking, in progress. But South Korea and Japan, two nations that experienced their reflecting an eagerness and drive to take the steps needed to move rapid periods of growth at least a decade or two ago, continue to make rapid ahead. Like a well-known U.S. car rental company which held second progress, significantly faster than both the United States and the EU-15. place in market share to the leader and whose slogan in the 1970s was Overall East Asia’s central challenge will be to transition in the next decade “We’re number 2, we try harder,” most if not all of these nations don’t see away from an export-led model of growth, much of it based on mercantilist themselves as number 1 and therefore they do try harder. In contrast, like policies like currency manipulation, to policies that spur innovation, IT use, an aging sports dynasty that has won the Super Bowl for many years but and productivity growth through all sectors of their economy—not just a few blithely ignores the rising performance of younger teams, many in the United select export industries. States still persist in believing that the United States is number 1 and that it is its destiny to remain so almost irregardless of what it does. But both And other Asian nations, including Russia (part of Russia is in Asia, part is the fact the United States is no longer number 1 and is progressing more in Europe) and India, also made rapid progress, albeit from low bases. Like slowly than every other nation examined here suggests that riding on past China, these nations have a long way to go before they can become true laurels is a risky strategy for the United States, or for that matter any nation. players in the global knowledge and innovation economy. Their strength The Information Technology and Innovation Foundation Page 4
  11. 11. ThE RANkINgS Overall Scores for each country and region Higher Government Scientific Venture Overall Researchers Corporate R&D New Firms Education R&D Publications Capital Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Singapore 1 73.4 12 38% 5 9.70 9 1.4% 3 0.9% 22 0.3 5 0.25% 2 19.0% Sweden 2 71.0 15 37% 2 12.52 2 2.5% 2 0.9% 1 2.5 2 0.30% 24 7.2% Luxembourg 3 66.2 14 37% 14 6.80 10 1.2% 36 0.2% 34 -0.8 N/A N/A 11 10.7% Denmark 4 64.5 7 40% 4 10.19 8 1.5% 11 0.7% 2 2.3 1 0.40% 4 14.1% S. Korea 5 64.2 4 51% 9 7.88 3 2.4% 7 0.7% 23 0.3 4 0.25% 1 19.0% U.S. 6 63.9 9 39% 6 9.69 6 1.7% 6 0.8% 5 2.1 6 0.18% 6 13.1% Finland 7 59.6 11 38% 1 16.51 4 2.3% 4 0.9% 4 2.2 14 0.10% 28 6.8% UK 8 59.2 18 35% 21 5.48 22 0.8% 18 0.6% 6 1.9 3 0.29% 3 15.4% Japan 9 59.0 3 53% 3 11.03 1 2.6% 20 0.6% 19 0.5 23 0.03% 38 4.4% NAFTA 10 58.6 16 35% 10 7.82 7 1.6% 8 0.7% 10 1.5 7 0.18% 15 9.9% Netherlands 11 58.4 17 35% 26 4.50 21 0.9% 16 0.6% 3 2.2 12 0.10% 10 11.3% France 12 57.3 10 39% 8 8.01 12 1.1% 5 0.8% 14 1.2 16 0.08% 7 11.8% Ireland 13 56.4 6 41% 19 5.87 23 0.8% 31 0.4% 16 1.1 17 0.06% 12 10.7% Belgium 14 56.3 5 41% 12 7.59 13 1.1% 26 0.5% 9 1.5 22 0.04% 23 7.4% Germany 15 55.0 26 22% 13 6.98 5 1.7% 10 0.7% 12 1.4 18 0.06% 8 11.7% Canada 16 54.4 2 54% 11 7.75 19 0.9% 12 0.7% 7 1.8 10 0.12% 32 6.3% Austria 17 52.6 27 20% 16 6.78 11 1.1% 1 0.9% 11 1.4 21 0.04% 20 8.5% EU-15 18 52.5 20 30% 17 6.23 14 1.1% 14 0.6% 13 1.3 11 0.11% 13 10.5% Australia 19 51.5 13 38% 7 8.43 18 0.9% 9 0.7% 8 1.6 19 0.05% 19 8.7% EU-25 20 50.6 21 29% 18 6.02 15 1.1% 15 0.6% 15 1.1 13 0.10% 14 10.2% Czech Republic 21 47.9 33 14% 23 4.83 20 0.9% 17 0.6% 26 0.1 32 0.00% 9 11.3% N/A N/A 5 13.4% Estonia 22 46.1 19 33% N/A N/A 25 0.4% 23 0.5% N/A N/A Spain 23 43.7 8 40% 20 5.71 24 0.6% 22 0.5% 18 0.7 15 0.09% 30 6.3% Hungary 24 42.5 28 20% 27 4.09 26 0.4% 27 0.4% 25 0.2 20 0.05% 17 9.2% Lithuania 25 40.8 N/A N/A N/A N/A 35 0.2% 28 0.4% N/A N/A N/A N/A 31 6.3% Italy 26 40.2 31 16% 30 2.97 27 0.4% 19 0.6% 17 1.0 24 0.03% 34 6.2% Portugal 27 38.7 29 19% 29 3.30 31 0.3% 25 0.5% 24 0.3 9 0.13% 29 6.4% Slovenia 28 37.6 24 25% 35 N/A 17 1.0% 24 0.5% 20 0.4 N/A N/A 21 8.0% Slovakia 29 37.0 32 16% 22 5.24 37 0.2% 35 0.3% 28 -0.2 30 0.00% 18 9.2% EU-10 30 36.9 25 22% 25 4.70 28 0.4% 30 0.4% N/A N/A N/A N/A 22 7.9% Latvia 31 36.5 N/A N/A N/A N/A 34 0.2% 29 0.4% N/A N/A N/A N/A N/A N/A Malta 32 36.2 N/A N/A N/A N/A 32 0.3% 39 0.2% N/A N/A N/A N/A 33 6.3% China 33 36.0 34 9% 31 1.48 16 1.0% 32 0.4% 32 -0.6 27 0.00% 36 5.3% Poland 34 35.4 22 26% 24 4.72 36 0.2% 33 0.3% 27 -0.2 29 0.00% 37 4.7% Russia 35 35.1 1 56% 15 6.80 30 0.3% 13 0.7% 33 -0.7 28 0.00% 16 9.4% Cyprus 36 33.2 N/A N/A N/A N/A 40 0.1% 34 0.3% N/A N/A N/A N/A N/A N/A Greece 37 31.5 23 25% 28 3.68 38 0.2% 37 0.2% 21 0.3 31 0.00% 27 7.0% Brazil 38 30.1 36 8% 33 1.00 29 0.3% 40 0.2% 30 -0.2 8 0.14% 26 7.1% Mexico 39 26.0 30 18% 32 1.19 33 0.2% 38 0.2% 31 -0.3 25 0.02% 25 7.1% India 40 21.6 35 9% 34 0.30 39 0.1% 21 0.5% 29 -0.2 26 0.00% 35 5.3% AVERAGE 36.5 23% 6.16 1.4% 0.7% 0.1 0.05 9.1% Page 5 The Atlantic Century
  12. 12. ThE RANkINgS Corporate Business E-Government Broadband IT Investments Trade Balance FDI GDP per adult Productivity Tax Climate Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score 21 0.70 14 2.6 6 6.96% 10 13% 1 38.8 1 29.3% 3 15.29% 3 77,523 8 47.0 1 0.92 2 5.3 11 6.51% 12 15% 10 11.7 5 7.8% 13 5.07% 7 66,108 9 44.9 13 0.75 15 2.6 N/A N/A N/A N/A 27 -8.8 2 24.5% N/A N/A 1 138,840 1 69.7 2 0.91 4 4.7 22 5.83% 31 25% 5 21.5 11 3.8% 19 3.03% 9 65,541 10 44.8 5 0.83 5 4.2 5 7.03% 17 18% 13 6.1 16 1.6% 34 0.59% 25 39,908 30 20.4 3 0.86 11 3.0 2 7.45% 36 32% 2 29.2 32 -5.8% 32 1.13% 2 83,422 5 50.6 14 0.75 6 3.8 30 5.14% 19 19% 11 11.5 8 6.0% 21 2.49% 15 60,585 15 41.4 10 0.79 13 2.8 7 6.74% 25 21% 6 21.3 28 -3.9% 7 7.28% 12 63,815 13 42.3 11 0.77 1 6.6 3 7.14% 35 32% 9 13.2 17 1.4% 35 -0.04% 18 58,107 21 35.8 9 0.80 21 2.1 8 6.60% 34 29% 7 18.4 N/A N/A N/A N/A 5 70,534 14 42.0 4 0.86 3 4.8 9 6.60% 32 26% 14 6.1 6 7.7% 15 4.22% 6 67,343 4 52.2 8 0.80 7 3.4 26 5.75% 11 14% 24 -1.9 24 -1.2% 17 3.70% 14 61,062 6 50.4 17 0.73 30 1.4 17 5.95% 5 10% 4 22.3 4 12.7% 2 19.45% 4 76,278 2 55.2 22 0.68 8 3.3 10 6.58% 21 20% 12 10.4 15 2.8% 5 12.55% 13 63,080 3 53.1 20 0.71 9 3.3 12 6.16% 28 24% 17 2.8 9 5.3% 31 1.38% 16 59,078 7 47.7 6 0.82 10 3.0 18 5.95% 33 26% 3 23.7 12 3.8% 16 4.09% 8 65,870 16 41.3 15 0.74 20 2.2 13 6.11% 24 21% 19 0.7 10 5.2% 29 1.47% 10 64,410 11 44.4 16 0.74 12 2.8 14 6.05% 23 20% 18 2.1 18 -0.1% N/A N/A 17 58,254 12 43.8 7 0.81 18 2.5 19 5.93% 27 23% 8 13.9 26 -2.0% 36 -0.64% 11 64,222 17 40.3 18 0.72 16 2.5 20 5.91% 20 19% 22 -0.1 19 -0.1% 28 1.55% 19 53,926 18 40.3 3.2% 9 6.58% 27 38,274 27 22.6 23 0.67 28 1.6 4 7.10% 9 13% 26 -7.7 14 12 0.76 23 1.9 N/A N/A N/A N/A 15 4.7 34 -7.8% 4 15.05% 29 35,525 28 21.6 19 0.72 22 2.0 28 5.48% 18 19% 28 -8.9 31 -5.8% 24 1.90% 21 50,564 19 38.4 28 0.65 25 1.7 21 5.91% 4 10% 25 -7.2 20 -0.2% 10 6.10% 30 32,401 26 23.7 26 0.66 19 2.5 N/A N/A 1 7% 16 3.4 36 -8.9% 12 5.13% 33 29,829 33 18.1 25 0.67 24 1.8 24 5.78% 29 24% 29 -10.6 21 -0.4% 27 1.61% 20 52,065 20 38.0 29 0.65 26 1.6 27 5.67% 16 16% 23 -0.6 35 -8.2% 20 3.02% 28 37,834 25 24.5 24 0.67 17 2.5 31 4.99% 15 16% 34 -14.3 23 -0.8% 26 1.62% 24 43,704 24 26.5 35 0.59 31 1.0 15 6.02% 3 9% 30 -11.1 29 -4.5% 11 6.07% 31 31,839 32 19.3 30 0.63 33 0.9 29 5.45% 6 11% 31 -11.4 N/A N/A N/A N/A 32 30,931 29 20.9 33 0.59 27 1.6 N/A N/A 2 8% N/A N/A 37 -17.4% 8 6.65% N/A N/A N/A N/A 27 0.66 29 1.5 N/A N/A N/A N/A 20 0.0 30 -4.5% 1 19.94% 26 39,652 N/A N/A 39 0.50 39 -0.8 1 7.81% 14 16% 36 -20.0 7 6.7% 18 3.21% 38 8,541 37 5.2 31 0.61 36 0.3 16 5.99% 7 12% 35 -16.4 22 -0.5% 14 4.58% 35 27,103 31 19.6 38 0.51 34 0.6 34 4.22% 8 13% 38 -34.3 3 13.2% 22 2.49% 36 24,047 35 14.6 32 0.60 35 0.3 N/A N/A N/A N/A 21 0.0 N/A N/A 6 7.61% 23 48,932 23 29.7 36 0.57 32 1.0 32 4.69% 22 20% 33 -14.3 33 -7.8% 33 1.02% 22 49,161 22 30.5 37 0.57 37 -0.6 25 5.77% 13 15% 37 -28.5 13 3.3% 25 1.74% 37 18,822 36 11.4 The Information Techology and Innovation Foundation 34 0.59 38 -0.7 33 4.58% 26 22% 32 -14.2 25 -1.4% 23 2.43% 34 29,501 34 17.6 Page 11 40 0.38 40 -1.9 23 5.79% 30 24% 39 -42.3 27 -2.9% 30 1.40% 39 5,575 38 3.4 0.70 0.0 6.50% 18% 0.0 0.6% 2.60% 51,838 33.6 The Information Technology and Innovation Foundation Page 6
  13. 13. ThE RANkINgS change Scores for each country and region Higher Government Scientific Overall Researchers Corporate R&D Venture Capital New Firms Education R&D Publications Rank Score Rank Change Rank Change Rank Change Rank Change Rank Change Rank Change Rank Change China 1 19.5 N/A N/A 1 111.4% 4 160.3% 12 19.9% 2 253.8% N/A N/A N/A N/A Singapore 2 19.0 N/A N/A 5 70.2% 14 36.8% 17 8.5% 4 189.6% N/A N/A 3 47% Estonia 3 18.1 N/A N/A N/A N/A 5 158.6% 15 13.2% N/A N/A N/A N/A 7 21% Denmark 4 17.4 10 38% 9 54.4% 21 12.9% 27 -1.0% 21 25.2% 1 228.7% 2 73% Luxembourg 5 16.9 2 76% 25 11.5% 36 -21.8% 1 112.5% 8 84.9% N/A N/A 31 -10% Slovenia 6 16.7 N/A N/A N/A N/A 17 20.3% 34 -8.9% 5 139.4% N/A N/A 5 25% Russia 7 15.2 N/A N/A 32 0.0% 39 -39.3% 8 29.3% 31 -17.5% N/A N/A 14 16% Lithuania 8 14.8 N/A N/A N/A N/A 8 74.5% 6 36.8% N/A N/A N/A N/A 13 16% Cyprus 9 14.7 N/A N/A N/A N/A 3 181.3% 3 78.6% N/A N/A N/A N/A N/A N/A Japan 10 14.4 19 18% 23 13.7% 18 20.2% 30 -6.9% 1 481.3% 6 23.1% 20 7% Hungary 11 14.3 7 43% 15 31.9% 9 63.2% 11 22.0% 13 48.1% 3 44.1% 27 -8% Slovakia 12 14.1 N/A N/A 11 45.6% 40 -47.1% 35 -12.5% N/A N/A 22 -90.9% 1 122% Czech Republic 13 13.8 13 27% 3 85.8% 12 46.1% 9 23.6% 30 -9.7% 25 -98.2% N/A N/A India 14 13.6 N/A N/A 10 50.0% 37 -22.1% 28 -2.3% N/A N/A N/A N/A 4 43% Latvia 15 13.4 N/A N/A N/A N/A 2 181.8% 2 98.4% N/A N/A N/A N/A N/A N/A Austria 16 13.2 5 54% 13 41.3% 11 47.7% 10 23.1% 12 56.6% 9 -24.6% 19 7% S. Korea 17 13.2 6 46% 4 71.3% 10 54.6% 7 33.2% N/A N/A N/A N/A N/A N/A Ireland 18 12.9 8 41% 19 24.9% 25 2.7% 4 52.1% 11 59.5% 13 -39.6% 9 20% EU-10 19 12.8 N/A N/A 7 63.6% 19 14.2% 26 -0.1% 15 41.4% N/A N/A 10 19% Spain 20 10.8 17 21% 8 63.1% 15 35.5% 5 46.6% 10 61.2% 11 -30.9% 25 -1% Sweden 21 10.7 20 16% 14 37.6% 26 2.3% 22 1.6% 23 16.6% 5 27.7% 6 24% -28.4% 11 17% France 22 10.6 15 26% 16 31.3% 29 -4.8% 23 1.6% 24 16.1% 10 Portugal 23 10.1 4 58% 30 6.5% 7 99.2% 32 -7.4% 3 215.8% 2 75.0% N/A N/A Malta 24 9.9 N/A N/A N/A N/A 1 338.1% 13 19.1% N/A N/A N/A N/A 12 17% Belgium 25 9.5 18 21% 24 11.6% 35 -14.0% 25 0.2% 14 42.3% 21 -65.1% 18 11% EU-25 26 9.4 14 27% 21 18.0% 24 4.0% 18 8.2% 19 26.1% 8 -16.4% 16 13% Poland 27 9.4 1 117% 12 43.0% 38 -29.5% 38 -20.2% 9 77.2% 23 -96.3% 26 -4% UK 28 9.0 12 30% 33 -3.9% 31 -9.8% 19 5.7% 26 10.2% 4 35.8% 15 14% EU-15 29 8.5 16 25% 26 11.4% 27 0.7% 16 8.8% 20 25.5% 7 -13.1% 17 13% Mexico 30 8.0 22 13% 2 98.3% 6 129.1% 37 -14.1% 6 113.2% N/A N/A N/A N/A Netherlands 31 7.9 9 40% 34 -11.8% 32 -11.3% 36 -12.6% 25 11.8% 17 -51.7% 8 20% Australia 32 7.4 11 31% 18 25.8% 13 39.8% 20 4.8% 22 17.8% 19 -59.8% 30 -10% Finland 33 7.3 25 0% 17 30.0% 23 8.1% 29 -6.4% 16 40.3% 15 -49.7% 23 5% Canada 34 6.3 21 15% 20 23.0% 20 13.8% 14 18.2% 29 -5.7% 18 -58.8% 24 -1% Germany 35 6.3 N/A N/A 28 9.1% 22 8.5% 31 -7.1% 18 27.8% 14 -41.8% N/A N/A Italy 36 5.2 3 60% 31 6.1% 34 -13.9% N/A N/A 17 35.5% 20 -61.3% 28 -9% NAFTA 37 5.1 23 6% 27 10.0% 28 -4.2% 21 1.8% 27 -3.9% 12 -36.7% 22 5% Greece 38 5.1 26 -4% 22 15.0% 16 23.2% 33 -7.6% 7 105.3% 24 -98.0% 29 -9% Brazil 39 3.7 N/A N/A 6 66.7% 33 -12.5% 39 -47.1% N/A N/A N/A N/A N/A N/A U.S. 40 2.7 24 3% 29 7.7% 30 -5.1% 24 1.3% 28 -4.3% 16 -51.2% 21 5% AVERAGE 11.2 22% 35.0% 32.0% 5.0% 66.9% -26.0% 10% Page 7 The Atlantic Century
  14. 14. ThE RANkINgS Business E-Government Broadband IT Investments Trade Balance FDI GDP per adult Productivity Climate Rank Change Rank Change Rank Change Rank Change Rank Change* Rank Change Rank Change Rank Change 4 21% 10 1835% 7 5.8% 6 33% 8 3.15% 15 -5% 1 89% 1 99% 38 -6% 17 1064% 33 -11.6% 24 -7% N/A N/A 21 -19% 13 38% 8 46% 18 9% 24 512% N/A N/A 5 42% 26 -0.58% 2 143% 2 88% N/A N/A 15 11% 32 330% 15 -0.7% 22 -5% 20 0.23% 34 -81% 21 28% 21 27% 11 15% 11 1808% N/A N/A 32 -62% 1 6.68% N/A N/A 11 41% 19 27% 23 6% 27 498% 2 44.4% 23 -5% 10 2.09% 1 177% 14 37% N/A N/A 10 16% 1 27829% 30 -9.4% 3 70% 15 1.34% 4 88% 4 69% 2 78% 6 19% 39 -97% N/A N/A 11 15% 11 1.90% 9 32% 3 84% N/A N/A 1 27% 13 1659% N/A N/A N/A N/A N/A N/A 18 -13% 32 22% N/A N/A 16 11% 6 3254% 5 8.8% 16 9% 24 -0.34% 35 -118% 23 28% 12 33% 2 26% 15 1191% 31 -10.7% 2 97% 12 1.83% 14 -4% 7 44% 4 52% 14 12% 2 10850% 34 -14.0% 4 57% 9 3.12% 11 9% 6 48% N/A N/A 3 24% 4 8498% 32 -11.3% 7 33% 4 4.31% 23 -32% 12 40% 5 52% 28 2% 7 2618% 1 50.7% 20 3% 27 -1.11% 3 121% 5 54% 3 62% 7 17% 14 1384% N/A N/A N/A N/A 35 -6.53% 8 32% N/A N/A N/A N/A 17 10% 37 251% 8 3.2% 29 -45% 6 3.63% 25 -48% 26 26% 24 26% 13 12% 34 270% 29 -9.3% N/A N/A 36 -8.14% 32 -70% 8 42% 6 49% 25 5% 5 6088% 12 0.6% 19 3% 23 -0.26% 19 -14% 18 33% N/A N/A 12 12% 3 10707% 16 -1.0% 25 -7% N/A N/A N/A N/A 10 41% 7 49% 5 20% 23 513% 28 -9.0% 12 14% 34 -4.74% 27 -60% 33 22% 30 21% 19 9% 35 267% 21 -4.9% 30 -49% 13 1.63% 31 -69% 19 32% 10 36% 8 16% 19 815% 20 -3.1% 26 -20% 33 -3.50% 10 17% 34 22% 18 28% 31 0% 29 467% 23 -5.6% 1 100% 14 1.36% 17 -10% 39 14% 31 21% N/A 17 1.04% 12 3% 37 16% N/A N/A 26 3% 31 360% N/A N/A N/A 30 1% 38 231% 4 10.8% 8 28% 28 -0.02% 7 34% 28 26% 28 23% 24 5% 21 630% 18 -2.4% N/A N/A 21 -0.03% 22 -27% 20 32% 17 29% 21 6% 8 2285% 6 6.9% 28 -32% 3 4.86% 16 -7% 15 36% 9 43% 36 -3% 18 1016% 26 -7.8% 9 21% 29 -2.64% 13 0% 17 34% 14 32% 27 3% 22 598% 19 -2.5% 31 -56% 22 -0.04% N/A N/A 27 26% 22 27% 32 -1% 9 1863% 3 20.2% 10 18% 19 0.44% 20 -18% 38 15% 29 22% 9 16% 30 361% 11 0.7% 18 3% 7 3.27% 30 -68% 25 27% 27 23% 34 -2% 12 1682% 22 -5.3% 14 11% 25 -0.54% 36 -130% 24 27% 25 26% 33 -2% 28 485% 25 -7.8% 27 -23% 31 -3.40% 26 -54% 16 34% 15 31% 29 1% 26 506% 27 -8.7% 21 -5% 18 0.96% 24 -38% 30 25% 26 24% 39 -6% 25 511% 10 1.5% 33 -88% 5 4.18% 33 -79% 22 28% 20 27% 35 -2% 16 1157% 13 0.4% 34 -94% 30 -2.92% 6 84% 36 19% 32 16% 37 -5% 33 286% 9 1.5% 13 13% N/A N/A N/A N/A 31 23% 16 30% 22 6% N/A N/A 24 -6.6% N/A N/A 16 1.24% 5 85% 9 41% 11 35% 20 8% 20 775% 14 0.1% 17 8% 2 5.00% 29 -65% 35 20% 23 27% 40 -7% 36 252% 17 -1.4% 15 11% 32 -3.45% 28 -65% 29 26% 13 32% 7% 2778% -1.0% N/A 0.00% -42.0% 21% 22% *Trade balance change is based on absolute change. The Information Technology and Innovation Foundation Page 8
  15. 15. Box 1: Differences between iTiF report and Other Global competitiveness rankings In the last few years a number of studies have corporate R&D. But in the last decade, that position assessed countries’ global competitiveness. Many of has declined. But, the perception of that decline among these have found that the United States is the world executives appears to have lagged. This might also be leader in international competitiveness. Such rankings why business leaders ranked the United States number have led many observers to claim that calls for concern 1 in venture capital in WEF’s surveys, yet measured by or questions about the U.S. competitiveness position actual venture capital investments per GDP the United are unwarranted. For example, the World Economic States is fifth. Forum’s report, The Global Competitiveness Report 2008-20097, ranked the United States first in global In addition, some studies rely on aggregate, unadjusted competitiveness two years in a row. While the WEF data, whereas ITIF divides every indicator by a report gave the United States an overall score 4 percent denominator (such as GDP, population, or workforce) in higher than that of Singapore (which was ranked fifth), order to control for the size of a country. For example, ITIF’s analysis indicates that Singapore is first in IMD’s report uses such indicators as total land area, global competitiveness. However, these studies have GDP, employment, and direct investment flows. This significant methodological limitations which need to be approach rewards large countries such as the United considered before concluding that all is well. States simply for being large. More accurate measures would use metrics adjusted for size (such as GDP per Some of these studies rely on opinion surveys for many capita). of their indicators. In contrast, ITIF relies exclusively on hard data. For example, the World Economic Forum’s Finally, other studies define competitiveness differently Global Competitiveness Report 2008-2009, which has than this report and therefore draw upon different ranked the United States first in global competitiveness, indicators. For example, The Economist’s E-readiness uses opinion surveys for about two-thirds of its data.8 Rankings 2008, which ranks the United States as the Similarly, IMD’s World Competitiveness Yearbook, most digitally advanced nation in the world, measures which also ranks the United States as number 1 uses a nation’s entire digital infrastructure and capacity, opinion surveys for about one-third of its criteria.9 from personal technology consumption to computer literacy. On the other hand, this report includes The advantage of opinion surveys is that they can digital infrastructure indicators, but also others within gauge factors where hard data are not available. But the larger context of innovation and competitiveness. because of limited knowledge, combined with likely Indeed, many of the indicators that are an integral respondent biases, the risk of using opinion surveys part of ITIF’s study (trade balance, FDI, and other is that they can be a better reflection of a nation’s economic performance indicators) make up less than reputation, than its actual position. 15 percent of The Economist’s study.11 Likewise, while the ITIF report focuses primarily on a country’s To illustrate, consider corporate investment in R&D. economic structure, policy, and performance to assess WEF ranks the United States third in the world, whereas national competitiveness, WEF casts a much larger ITIF ranks the United States ranks fifth. While WEF net. The WEF report covers topics such as health relies on an executive opinion survey, we use actual care (including, for example, malaria and tuberculosis R&D investments as reported to governments in firm incidents, which the United States ranks number 1 in surveys. And other reports using a similar method find both), and infrastructure (such as the available airline similar results.10 One likely reason for this discrepancy seats per kilometer, where the United States also ranks is that the United States has long been a leader in number 1). Page 9 The Atlantic Century
  16. 16. hUMAN CAPITAl higher education Attainment Percent of Percentage of adults aged 25-34 with a tertiary degree adults aged Percent 25-34 with Change Why Is This Important? Innovation and productivity are supported by a Rank Country Rank Country highly educated workforce, so higher education attainment has become tertiary 1999- an important component of economic success, particularly in higher wage degree 2005 nations that can compete less effectively in lower skilled, routinized work. 2005 Europe vs. the United States: The United States leads Europe in terms 1 Russia 56% 1 Poland 117% of higher education attainment, with EU-15 levels 77 percent of U.S. levels 2 Canada 54% 2 S. Korea 46% and EU-10 levels just 57 percent. A few EU nations, however, exceed U.S. 3 Japan 53% 3 Ireland 41% levels, including Ireland, which has made higher education attainment a 4 S. Korea 51% 4 Australia 31% key building block of its development strategy, and Spain. But some other European nations rank relatively low. For example, Germany scores at just 5 Ireland 41% 5 UK 30% 56 percent of the United States level in part reflecting its strong tradition of 6 Spain 40% 6 EU-25 27% technical education, as opposed to four-year college education, and longer 7 France 39% 7 France 26% higher education program lengths which graduate fewer students. 8 U.S. 39% 8 EU-15 25% Indeed, a country’s graduation rates seem to be at least loosely connected to 9 Australia 38% 9 Spain 21% the length of a degree program. For example, countries with short program 10 Singapore 38% 10 Japan 18% length such as Australia, Denmark, Finland, Iceland, Italy, the Netherlands, 11 Sweden 37% 11 Sweden 16% New Zealand, Norway, and Poland tend to have higher graduation rates, whereas countries like Germany and Austria, with longer program lengths 12 UK 35% 12 Canada 15% graduate fewer students.12 13 NAFTA 35% 13 Mexico 13% 14 EU-15 30% 14 NAFTA 6% When it comes to trends, however, the picture is quite different. The United 15 U.S. 3% States ranks last, with almost no increase since 1999. In contrast the share 15 EU-25 29% of 25- to 34-year-olds in the EU-15 with a tertiary degree increased by 25 16 EU-10 N/A 16 Poland 26% percent, in part because of very strong growth in nations like Ireland and the 17 EU-10 22% 17 Singapore N/A United Kingdom. In addition, some EU-10 nations increased even faster, 18 Germany 22% 18 Germany N/A including Poland (117 percent). 19 Mexico 18% 19 China N/A Europe and the United States vs. the Rest of the World: Despite the fact 20 China 9% 20 Russia N/A that the United States led for many years in higher education attainment, it 21 India 9% 21 India N/A no longer does. In fact, Russia leads with an over 40 percent higher rate, while Canada, Japan, and South Korea lead the United States by over 30 22 Brazil 8% 22 Brazil N/A percent. And all four have attainment rates over 70 percent higher than Average 23% Average 22% EU-15 rates. Most developing nations have much lower rates, with rates in Brazil and India below 30 percent of U.S. rates. Source: OECD, 1999-2005 data. The United States is losing ground relative to other nations, and in fact was lowest in overall growth rate in nations examined where data are available. In contrast, the EU-15 fared better, with growth rates exceeding nations like Mexico, Canada, and Japan, but still behind countries like South Korea and Australia. The Information Technology and Innovation Foundation Page 10
  17. 17. hUMAN CAPITAl Science and Technology researchers only European nation not making progress as fast as the United States was the United Kingdom. The EU-10 region made rapid progress, increasing 64 Science and technology researchers per 1,000 employed percent, in part by building upon a solid tradition of science and engineering and being able to take advantage of growth in technology-based industries. Why Is This Important? Scientists and engineers are key drivers of innovation and as global economies become more innovation-based, they are even more Europe and the United States vs. the Rest of the World: Japan leads Europe important. Indeed, there were over 40 percent more researchers per 1,000 and the United States, with a 13 percent higher score than the United States employees in 2005 than in 1995 in Organization for Economic Cooperation and a 77 percent higher score than the EU-15. Notwithstanding the technical and Development (OECD) countries and in non-OECD countries the percent progress in nations like India, Mexico, Brazil, and China, these developing nations increase was even larger. still have much lower levels of researchers. In fact, India’s level is just 3 percent of U.S. levels, and China’s is 15 percent. In part because of its long commitment to Europe vs. the United States: Europe lags behind the United States in the military research and strong scientific education, Russia’s level is relatively high, number of researchers, with the U.S. researcher intensity over 55 percent exceeding the EU-15 by 9 percent. higher than the EU-15 and twice as high as the EU-10. The strong science and technology base of the United States economy established after World War II and Although globally two-thirds of researchers are employed by businesses this reenergized with strong IT and biotechnology leadership more recently means figure significantly differs by a country’s economic mix and national priorities. that the United States is among the world leaders. This is not to say that some For example, in the United States over eighty percent of researchers work for European nations do not rank high. In particular, the Nordic nations of Finland, businesses, yet only two-thirds do so in Japan and less than one-half do so in Sweden, and Denmark, with their technology-driven economies, rank above the European nations.13 United States. However, other EU nations rank considerably below U.S. levels, including France (83 percent), Germany (72 percent), Ireland (61 percent), Spain When it comes to trends, most other nations are making faster progress than (59 percent), and the United Kingdom (57 percent). Among EU-10 nations, the United States. Perhaps not surprisingly given its concerted push to be a Poland is just 8 percentage points behind the United Kingdom and at about half more technologically-based economy China grew the fastest, with its share of of U.S. levels (49 percent). researchers more than doubling. But other lagging nations also experienced rapid growth, with Mexico almost doubling (98 percent); Brazil up two-thirds, and When it comes to trends though, the situation is different. While both saw India up 50 percent. A few nations such as South Korea and Singapore that had increases between 1999 and 2006, researcher intensity in the EU-15 increased relatively high levels of researchers in 1999 made rapid progress, increasing by faster (30 percent) than in the United States. Lagging nations, including approximately 70 percent. Finally, Japan and Canada both outpaced the EU-15 Spain, Poland, and Ireland, made significant gains, at or above 25 percent. and the United States. However, so too did some leading nations, including Sweden and France. Germany however, grew just slightly faster than the United States, and the Researchers per Percent change Rank Country 1,000 employed Rank Country 1999-2006 2006 1 Sweden 12.5 1 China 111% 2 Japan 11.0 2 Mexico 98% 3 Singapore 9.7 3 S. Korea 71% 4 U.S. 9.7 4 Singapore 70% 5 Australia 8.4 5 Brazil 67% 6 EU-10 64% 6 France 8.0 7 S. Korea 7.9 7 Spain 63% 8 NAFTA 7.8 8 India 50% 9 Canada 7.8 9 Poland 43% 10 Germany 7.0 10 Sweden 38% 11 Russia 6.8 11 France 31% 12 EU-15 6.2 12 Australia 26% 13 EU-25 6.0 13 Ireland 25% 14 Ireland 5.9 14 Canada 23% 15 Spain 5.7 15 EU-25 18% 16 UK 5.5 16 Japan 14% 17 EU-15 11% 17 Poland 4.7 18 EU-10 4.7 18 NAFTA 10% 19 China 1.5 19 Germany 9% 20 U.S. 8% 20 Mexico 1.2 21 Brazil 1.0 21 Russia 0% 22 India 0.3 22 UK -4% Average 6.2 Average 35% Source: UNESCO, Institute of Statistics, 1999-2006 data. Page 11 The Atlantic Century

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